What Drives the Markets Down?

You know, with all of the headlines on CNBC about the “Credit Crunch”, “Housing Slump”, all around doom and gloom, it’s tough to feel good about the financial future. I’ve always kinda wondered what causes these huge dips in the markets and one of the articles on CNBC raised my brow.

One guy, from a third party, can come in out of no where and wipe you out.

Citi Investment Research analyst Prashant A. Bhatia cut his rating on the stock to sell from hold and lowered his price target to $7.50 from $13. E-Trade shares were down 34% at $5.65 in recent premarket trading.

Bhatia said there’s a 15% chance that E-Trade will declare bankruptcy and said management may be forced to sell loans and securities at significant discounts.

Um… okay.

I guess what bothers me the most is that Bhatia works for another investment group. A rival of E*Trade, to a certain degree. And if memory serves me correctly, it was just last week that Citi was in the crosshairs.

Pretty nifty way to deflect attention, if you ask me.

Further, being that these are “number” guys, how on earth did he come up with a stat like “there’s a 15% chance that E-Trade will declare bankruptcy?”

Seriously.

He’s not much of a soothsayer in my book. C’mon, 15%? Not a real definite prediction there…

I mean, I’d say with certainty that I have a 15% chance of getting food poisoning today — but that’s the thing, that’s such a low percentage that I’m not going to let it bother me.

But the scary part is that Bhatia’s comments actually caused E*Trade to plummet.

The way the markets sway on tiny little snippets like this — it’s unreal?!